Applied Digital reported second-quarter fiscal 2026 revenue of $126.6 million, representing a 250% year-over-year increase and surpassing consensus estimates by more than $38 million. Growth was driven primarily by expansion in high-performance computing hosting, reflecting the company's strategic pivot away from crypto mining services. Sequentially, hosting revenues doubled as new hyperscale clients came online, contributing to a record quarterly backlog of signed contracts.

Management officially announced the planned spin-off of its money-losing cloud services division, ChronoScale, in partnership with EKSO. This divestiture eliminates a persistent drag on margins and allows the core data center business to focus capital on accelerated campus builds. Investors reacted positively to the announcement, as the separation is expected to close in Q3 FY26 and will be tax-efficient for shareholders.

Applied Digital has sold out its 600 megawatt campus developments in North Dakota to CoreWeave and another unnamed hyperscaler, locking in over $16 billion in lease revenue over a 15-year term. The company has already begun generating income from the first 100MW phase, with the remaining capacity scheduled for activation over the next 18 to 24 months. In addition, CEO Wes Cummins highlighted that inbound demand has surged, with advanced discussions underway for an additional 900MW of capacity across multiple U.S. regions, positioning the company to rapidly expand its footprint.

With lease revenue ramping as new data halls come online, Applied Digital projects a steady increase in recurring cash flows through 2030. The prefabricated construction model and in-house concrete plants reduce build times by up to 30%, allowing the company to capitalize on the estimated U.S. AI data center capacity shortfall of 10GW per year through 2028. Analysts forecast mid-teens operating margins by FY28, driven by scalable hosting operations and lower capital intensity post spin-off.